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Posted almost 8 years ago

​Best Use of Your Time: Chasing a Promotion or a Rental Property?

A friend recently told me about her efforts to secure a promotion at work and it sparked a conversation about the financial value of time. At her workplace, colleagues at her level are all reviewed once a year for a limited number of promotions based on written performance reviews. She said the promotion would add $10,000 to her salary and she thinks she has a 50% chance of being promoted. In simple terms, a 50% chance of securing $10,000 could be valued at $5,000. (This assumes there are no other non-financial perks that come with the promotion.) If she does not get promoted, she is not eligible again for another full year. So, I asked if all the extra hours of effort she would put in during a year pursuing that promotion are worth $5,000 per year?

Place Effort in What Makes Economic Sense

Although most promotion systems are not quite this rigid, it is a good tool for thinking about the investment of time and effort compared to a potential reward. We always want to perform at our best to excel, gain more experience, and obtain new responsibilities. However, does the focus on trying to secure an estimated 50% chance at a $10,000 prize make smart economic sense? With just a few weeks of effort on BiggerPockets a newbie can get a free crash course in real estate investing. If you spend a few more days applying what you learn and run the numbers on properties for sale in your area you will have an idea about valuation and potential returns.

Reduce Your Risk, An Easier Way to Make $10,000

There is risk of loss in regard to time in the same way there is a risk of loss in regard to money. You are taking a risk contributing a significant number of extra hours hoping for a promotion which might not pay off. But, fortunately there are other ways to secure a higher probability of a $10,000 return with less risk to your time. One way to secure an immediate $10,000 return is through negotiation. Experienced investors have learned that it is not tremendously difficult to find a motivated seller willing to reduce the selling price of their property by $10,000 or more. A second option is to spend the extra time you would have allocated to working towards a promotion on finding a good buy and hold rental property to purchase. I like the security of knowing that if I do my due diligence, I will generate a solid return on a real estate investment, far more than rolling the dice and hoping I will get a promotion. A good buy and hold property could definitely generate that $10,000 a year in the form of cashflows, building equity, and tax deductions.

Remember your time is valuable and even if you love your day job, you still want to be allocating time to investments that will generate a return both financially and in terms of learning the skills you need to make wiser investments. It is also worth keeping in mind, that employers stop paying once you quit your job. But, real estate investments can continue to payout long after you quit your job.

Nathan Carter 



Comments (1)

  1. Well said!